As Apple prepares to launch an iTunes-branded streaming music service, it has come under investigation from government regulators.
Two decades ago, Apple was saved by an infusion of cash and a commitment to continue developing Office on the Mac from Microsoft, its then arch-rival. Microsoft was in the throes of a massive antitrust investigation from the US Government and needed to keep Apple alive as its main competitor.
Today, things are so very different. Apple finds itself under antitrust scrutiny once again over its dominant place in the world's digital music download market.
Because it is, by far, the largest seller of digital music downloads, the US Federal Trade Commission (FTC) is investigating deals Apple is trying to make for a new subscription streaming music service it wants to launch next month at its Worldwide Developers Conference (WWDC).
The service is a reworking of the Beats music service that Apple acquired when it purchased the headphone maker last year. According to Bloomberg, the investigation is focusing on inquiries Apple has made with more than a dozen artists over exclusive rights to music and partnerships for the service.
Apple frequently offers special content from artists on iTunes, either through exclusive offerings, behind-the-scenes videos, or other perks. Apple isn't thought to be paying for these but can offer prime placement and promotion on the store, helping to bolster an artist's visibility and thus sales.
The government's concern is that by combining its 800-pound gorilla status with the iTunes Music Store and a new streaming offering, it will unfairly compete with competitors like Spotify who don't necessarily have the leverage to get the best deals.
FTC officials have, according to the Bloomberg report, spoken to a number of music-industry executives about whether Apple's negotiations will discourage them from offering songs on ad-supported music services like Pandora and Spotify's free-tier (Apple's streaming service will be paid-only, while its iTunes Radio offering will remain free).
Apple is not said to have made any such demands on the big three record labels—Universal, Warner, and Sony—but if such so-called anticompetitive practices result from Apple's negotiations anyway, the company could be in a tough spot.
Apple acquired Beats last year for $3 billion, at least partly for its fledgling streaming music service, but also for its industry expertise and booming (and profitable) headphone business.
A few years ago, Apple was sued by US regulators over contracts it signed with book publishers, claiming the company leaned on the publishers to sign agreements that made e-books more expensive. Apple lost, though it argued that Amazon was the anticompetitive one, as it was selling e-books to its Kindle customers for $9.99, which was below its cost in many cases.
Apple vigorously defended itself in the lawsuit, possibly spending more on lawyers than it would have cost to settle the case. It continues to fight the Government on appeals. I wouldn't be surprised to see Apple fight it out again, if this investigation continues.
How do you think this antitrust investigation will pan out?
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